Chow Shing Kee Investment Co Ltd v. The Incorporated Owners of Malahon Apartment and Others

HCMP 1729/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1729 OF 2011

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BETWEEN

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Before: Deputy High Court Judge Houghton, SC in Court

Dates of Hearing: 22, 23, 26, 27, 28 March 2012

Date of Decision: 27 April 2012

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D E C I S I O N

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The Background and the Plaintiff’s case:

1.The Plaintiff's case arises out of the Order made by Sakhrani, J on 5^th May 2010 in HCA 816 of 2004 by which the court required the 1^st Defendant to remove certain soil water pipes from the premises of the Plaintiff.  The pipes have not been removed and the Plaintiff seeks orders for committal against the Defendants. The proceedings which gave rise to the Order were brought by three plaintiffs only one of whom was the recipient of the Order which is the basis for these committal proceedings.  The various Defendants are represented by 3 separate legal teams and have appeared by counsel (Andrew Mak on behalf of the 1^st Defendant; Jonathan Man on behalf of the 2^nd and 7^th Defendants, and Patrick Chong on behalf of the remaining Defendants). 

2.During the course of the hearing the Plaintiff made an application to Amend the Originating Summons and the Statement under Order 52, and the Defendants made Submissions of No Case to Answer.  Those are the matters addressed in this Decision.

3.The evidence before the judge leading to his injunction Order was such as to indicate to him that the pipes in question had originally been routed differently from the present arrangement.  He held that the present arrangement was a breach of the obligations imposed by the DMC which breach the 1^st Defendant was under an obligation to remedy by enforcing those obligations (paragraph 89 of the judgment). 

4.The Order of the Court was therefore that the 1^st Defendant should remove those pipes from the Plaintiff's property.  It is common ground that the 1^st Defendant has not done so.  It is also common ground that, at a practical level, the pipes cannot simply be disconnected at the point they enter the Plaintiff's property.  It is necessary for there to be some alternative arrangement for the discharge of sewage from the upper floors.  Although the Court was clearly aware of this requirement at the time that the Order was made, the Order was framed in terms which did not mandate the way in which this problem was to be resolved.  The Order confined itself to a cessation of the infringement of the Plaintiffs rights.

5.It is appropriate to set out the terms of the Order.  It provided:

“There is to be a mandatory injunction on the [Plaintiff’s] claim that the [1^st] Defendant to remove the Pipeworks and reinstate the walls in Shop 2A where the Pipeworks pass through by 5^th November 2010 with liberty to the parties to apply in case there is difficulty in complying with this Order.”

6.By 15^th August 2011 the Plaintiff had formed the view that compliance by the 1^st Defendant was not going to be achieved without pressure being applied and, seemingly in consequence, the present application for committal for contempt in failing to comply with the Order of the court was initiated.

7.Although the Order was directed only to the 1^st Defendant, the application for committal has been brought to include the individuals who are said to form the management committee performing the functions of the Incorporated Owners.

The Amendment

8.During the course of the proceedings before me the Plaintiff applied to amend its Originating Summons and the Statement.  The thrust of the Amendment was in regard to the complaint against the 2^nd‑11^th Defendants. The Originating Summons alleged that the 2^nd‑11^th Defendants had failed to carry out their duties as members of the management committee of the 1^st Defendant to take reasonable steps to ensure that the Injunction Order was complied with.  The amendment sought to add that the relevant Defendants should have used their positions on the management committee to cause a competent building contractor to be engaged for the removal of the pipes from the Plaintiff’s premises.  In breach of such duty the 2^nd–11^th Defendants had wilfully failed to take any such action.

The Evidence on Behalf of the Plaintiff

9.The Plaintiff relied on evidence provided by a Ms Tam Wai Hing, a director of one of the plaintiffs in HCA 816 of 2004.  Ms Tam attended the hearing and was cross examined on behalf of all of the Defendants.  Evidence was also adduced from an expert witness, Mr John Cock.  Mr Cock also attended and was cross examined. 

10.No comment as to any of that evidence falls to be made at this stage.  I record however that almost the whole of Mr Cock’s cross examination was directed to the reinstatement or replacement of the sewage system, not the removal of the pipes as such.  The Defendants have advanced a contention that it was not possible, or at the least highly impractical, to reinstate the pipes following their removal from the Plaintiff’s premises in their original locations. 

The Submissions of No Case

11.All three sets of defendants have made submissions of no case to answer.  For the purposes of this Decision however the defendants can be divided into 2 sets; the Incorporated Owners (the 1^st Defendant) and individual members of the management committee (the 2^nd to 11^th Defendants; “the Individual Defendants”).  Mr Man and Mr Chong each allied themselves with the submissions of the other such that, for present purposes, the Individual Defendants can be considered as a group.

12.For the reasons that appear below I do not think it appropriate to set out in any detail the views I have formed in regard to the various arguments advanced on behalf of the Individual Defendants, with one exception.  I have concluded that the Individual Defendants do not have a case to answer, but have formed a different view in regard to the 1^st Defendant.  Since proceedings will therefore continue against the 1^st Defendant I do not wish to express any view on the merits or the law save to the extent necessary to explain my decision.

13.Before turning to consider the matters advanced on behalf of the Individual Defendants I set out the gist of the Plaintiff’s submission in regard to the submission of no case to answer.  The first point taken on behalf of the Plaintiff is that the submissions do not challenge the Plaintiff’s evidence.  I am reminded (as Counsel for the 1^st Defendant also reminded me) that the decision in R v Galbraith [1981] 1 WLR 1039 is to the effect that the appropriate test is to enquire whether “the prosecution evidence taken at its highest is such that a jury properly directed could not properly convicted on it”. 

The Individual Defendants

14.Among the points taken on behalf of the Individual Defendants was a complaint that the Originating Summons and the Statement under Order 52 rule 2 was deficient.  Both Counsel for the Individual Defendants complain that the obligation which is said to have been breached by the Individual Defendants in the Originating Summons and in the Statement is in terms a complaint that the Individual Defendants have failed to ensure compliance on the part of the 1^st Defendant. The Individual Defendants say that an allegation in this form does not disclose a breach on the part of a person in the position of the Individual Defendants.

15.In its unamended form the Individual Defendants submit that the Statement (and Originating Summons) is unarguably bad. It is submitted that the proposed amendment does not cure the defect and, for that reason, ought not to be allowed. In support of the former proposition I am referred to the decisions of the court in Hong Kong in Fonfair; Excel Noble; and the English decision in Tuvalu.

16.To quote from the decision in Fonfair Co Ltd v UDL Management Ltd (HCA 2002/2001):

“33. As to a director’s liability in the context of Order 45, Woolf LJ (as he then was) said in AG for Tuvalu v. Philatelic Distribution Corp [1990] 1 WLR at p.937E-F :

‘In our view where a company is ordered not to do certain acts or give an undertaking to like effect and a director of that company is aware of the order or undertaking he is under a duty to take reasonable steps to ensure that the order or undertaking is obeyed, and if he wilfully fails to take those steps and the order or undertaking is breached he can be punished for contempt. We use the word ‘wilful’ to distinguish the situation where the director can reasonably believe some other director or officer is taking those steps.’

The authorities cited by counsel detail this general duty of director to take reasonable steps to ensure compliance thus. He has a personal duty (a) to find out exactly what have to be done by the company to comply with the order; (b) to see that such things are done properly and in accordance with the time set out in the order, whether by delegating the task to other employees of the company or by themselves personally; and (c) in the case of delegation, to ensure that the employees understand the requirements of the order and do the things properly within the time set out in the order; and to supervise the staff to ensure that they did carry out their instructions properly and timely.”

17.The proposition derived from this (and from the decisions in Cartier International BV v Kaybee International Ltd [1985] HKLR 127 and Excel Noble Development Ltd v Wah Nam Group Ltd [2001] 4 HKC 148) is that the liability of a company director for a breach of a court order is not absolute.  There must be an element of personal culpability involved.  This would be so whether the director was said to be liable under Order 45 rule 5 principles or as an aider and abettor of the breach by the company.

18.In Chiltern v Keane [1985] 1 WLR 619 it was held that the sufficiency of particulars was to be considered by reference to whether the charge gives the person enough information to enable him to respond to it.  In order for the Individual Defendants to be able to respond to a complaint that they have failed to act, it is said that the Statement should describe the steps that ought to have been taken.  This is necessary, not least so as to enable the Individual Defendants to purge their contempt if appropriate.

19.The Individual Defendants stress the nature of the position held by them in the management committee.  All are, I am told, unpaid volunteers.  It is submitted that there is a distinction to be drawn between their position and the position of directors of companies.  Reference is made in support of this proposition to the Building Management Ordinance which was enacted, in part, for the protection of individuals serving on such management committees. In light of the above considerations it is submitted that it is incumbent on a party seeking an order for committal against the members of a management committee to set out precisely what it is that the members individually ought to have done, but deliberately and consciously failed to do.

20.The complaint that the Individual Defendants “failed to ensure” compliance by the management committee is, as was analysed in Fonfair and the cases there referred to, an allegation of a failure to comply with an absolute liability sought to be imposed on persons in a position which is at most analogous to directors of a company.  The authorities show clearly that directors of companies are not burdened with such absolute liability and in my view there is no basis on which it could be said that any such absolute liability is to be imposed on the members of a management committee. Applying that test the Statement is deficient in its unamended form.

21.The question then is whether this defect is ‘cured’ by the proposed amendment.

22.The Individual Defendants say not because the Statement remains defective in not specifying whether the Individual Defendants are alleged to have incurred liability under Order 45, or as aiders and abettors.  More importantly perhaps, the Statement fails to adequately specify the steps that the Individual Defendants ought to have taken, but did not. 

23.The Order required expressly certain, quite straightforward steps to be taken, but also required implicitly certain other steps which were less straightforward.  The Plaintiff’s focus has been on the express requirement; the removal of the pipework.  This was the reason it went to Court in the first place.  The proposed amendment confines itself to the actioning of the removal of the pipes, but is silent as to the other steps that would be required. The Plaintiff has sought to add an allegation that a contractor should have been employed to remove the offending pipes.  That seems to me to be a reformulation of the proposition that the Individual Defendant’s were absolutely liable to cause the 1^st Defendant to perform. 

24.The Individual Defendants (and the 1^st Defendant) have focused on the implicit aspects of the Order; the re-routing or reinstatement of the sewage system.  Maintenance of a working sewage system in the building is the responsibility of the 1^st Defendant with or without any Court Order.  The question is whether, or the extent to which, the Plaintiff must spell out in the Statement the steps that ought to have been taken.  So far as the Individual Defendants are concerned I have no real doubt that it is incumbent on the Plaintiff to set out a detailed complaint as to the steps that ought to have been taken to cause the 1^st Defendant to comply with the Order.  It is not sufficient to allege that the Individual Defendants have failed to cause the 1^st Defendant to comply with the Order.  The Statement must specify what each Individual Defendant as a member of the management committee did or failed to do.  However I do not share the view advanced by counsel for the Defendants in submissions that this must extend to the detail of a proposal for the whole reinstatement of the drainage system.

25.While there is agreement that the Order of the Court has not been fulfilled, I am persuaded that it is inappropriate for an application for committal to be made against persons in the position of the Individual Defendants without specific detail being provided of the alleged failures on their part.  The simple fact of non-compliance with the Court Order cannot be taken, in the circumstances of this case at least, as establishing contempt of court on the part of individuals who are not themselves subject to the Order. 

26.In my judgement so far as the Individual Defendants are concerned the Originating Summons and the Statement is defective in this regard with or without the proposed amendment.  In line with usual practice therefore I do not grant leave to the Plaintiff to amend since the amendment would be useless.

27.As appears from the above I accept therefore that the Individual Defendants are entitled to a ruling in their favour in regard to their submission of no case to answer, and I so determine.

The 1st Defendant

28.The position of the 1^st Defendant is, it seems to me, rather different.  The 1^st Defendant was (and is) bound by the Order in the terms in which it was made.  Counsel for the 1^st Defendant allied himself with submissions made on behalf of the Individual Defendants that the Plaintiff must specify what steps the 1^st Defendant should have taken towards reinstatement of a working sewage system but had not taken.  The Order did not specify how the 1^st Defendant was to comply, but simply called on the 1^st Defendant to act lawfully.  I do not see how it can be incumbent on the Plaintiff now to explain to the 1^st Defendant via the Order 52 statement how it should have complied with the Order in those circumstances.

29.Asking myself the “Galbraith” question as to whether the Plaintiff’s evidence is such that no conviction could be based on it, the answer I arrive at is that a conviction could be made based on that evidence.  Accordingly I conclude that the 1^st Defendant has a case to answer.

Mr Colin Wright and Mr Iain Brown, instructed by Messrs Orrick, Herrington & Sutcliffe for the Plaintiff

Mr Andrew Mak, instructed by Messrs Tung, Ng, Tse & Heung, for the 1^st Defendant

Mr Bernard Man, instructed by Messrs Wong, Hui & Co, for the 2^nd and 7^th Defendants

Mr Patrick Chong, instructed by Messrs T Y Lam & Co, for the 3^rd–6^th and  8^th–11^th Defendants